A global investment firm based in Canada is investing $400 million into the U.S. self-storage sector.
Montréal-based Ivanhoé Cambridge has partnered with Safely Store Self Storage to buy and develop a portfolio of facilities throughout the U.S. Safely Store is a platform of Iron Point Partners LLC and Taylor/Theus Holdings Inc.
The initial investment into the storage industry, a first for Ivanhoé, will focus on Tier I and Tier II markets and seeks a combination of vale-add opportunities, ground-up developments, redevelopments, lease-up projects and undermanaged facilities.
The Storage Beat connected with Michael Neuman of Ivanhoé, as well as Tyler Colpini, David Ellison, and Steve Moffat of Safely Self Storage to find out more about the new partnership.
Storage Beat: Are there any projects underway or deals under contract or completed yet?
David Ellison, Chief Development Officer Safely Store Self Storage: “We have an active pipeline of development projects in South Florida, New Jersey, and California. The partnership has closed on two seed development projects that are scheduled to begin construction this month. The first is a four-story 121,900 GSF ground-up project in South Florida, and the second is a 95,000 GSF conversion of an existing office building in Northern New Jersey. Additionally, Safely Store is in the final permitting stages for a 108,000 GSF three-story ground-up development project also in South Florida. We expect to start construction in late Q3. We have been working on the entitlements for the three projects for the last 2+ years.”
Steve Moffat, Chief Investment Officer, Safely Store Self Storage: “We are currently negotiating the purchase and sale agreement on two one-off acquisitions in Dallas and Phoenix. With the recent announcement, we are receiving inbound calls and are excited about the opportunities.”
Looking at development vs acquisition, are you focusing on one over the other initially or an even mix of both?
Michael Neuman Head, Industrial, United States and Latin America, Ivanhoé Cambridge: “The investment strategy is designed with flexibility and diversification in mind, covering the risk/return spectrum to blend to a value-add return with a mix of ground-up developments, redevelopments, and acquisitions of lease-up projects and undermanaged operational assets. In terms of targeted allocations, we expect developments, redevelopments, and value-add acquisitions to make up the lion’s share (60-80%), with acquisitions of C/O or early lease-up facilities making up the rest.”
Right now it seems there is a lot of capital chasing storage deals, but not so many sellers. What is the firm’s plan for outcompeting other investment groups?
Michael Neuman: “Relationships are a key differentiator in this space. We’ve aligned ourselves with the right strategic partners that have strong and established industry relationships to source coveted sites for development or gain access to redevelopment or acquisition opportunities.”
Tyler Colpini, CEO, Safely Store Self-Storage: “We feel there are several aspects of our platform that will allow Safely Store to be uniquely positioned to create a high-quality national portfolio. As Michael mentioned, we can invest across the spectrum of self storage opportunities allowing us to be nimble and adapt to real-time market conditions. We have a lower leverage capital structure (~35% LTC/LTV), which we think will be advantageous given the current conditions in the capital markets.”
David Ellison: “The principals of Safely Store have a combined 30+ years of experience in the self storage industry. Through that experience, we have developed a strong network of partners/contacts, and we intend to leverage those relationships to source investment opportunities.”
Specifically on developments, our team has extensive experience and exposure to the challenges that each project may present. Throughout our history, we have consistently and successfully overcome hurdles related to our developments, which can include lengthy entitlements timelines, site constraints (e.g., wetlands, topography, easements), unforeseen subsurface conditions, and environmental concerns. We have a proven track record of working with partners and sellers on complex sites, including mixed-use developments that require rezonings, special land use permits and brownfield agreements. We also have a reputation in the self storage community as an organization that can quickly execute on entitled self storage sites.”
Steve Moffat: On acquisitions, our team has many years of experience valuing, negotiating, and closing complex self storage transactions across the nation. As David mentioned, we have built long-standing relationships with self storage brokers, property owners and developers that have and will continue to source new opportunities. We feel our reputation of being able to close deals with flexible, creative solutions will lead to additional opportunities.
How will the portfolio be managed?
Michael Neuman: The current strategy is to leverage Safely Store’s strong existing relationships with multiple institutional property managers across the U.S. We also intend to integrate some of the most advanced technological solutions into the management of these facilities, while retaining a human touch in greeting our clients. This reception remains key to the quality of service we strive to offer.
Any particular regions or markets that you are focusing on?
Michael Neuman: The focus is predominantly on Tier I and Tier II cities (top 25 MSAs) across the U.S., with some consideration for Tier III markets (top 26-50 MSAs). The chosen locations must satisfy specific demographic and supply criteria. In alignment with our sustainable investment approach, ESG criteria, such as climate-related risks, are also taken into account.
Tyler Colpini: We will continue to target dense markets across the country, as we have done for the past 17 years. Specifically, we are looking for opportunities in Boston, NY/NJ, Washington D.C., Charlotte, Atlanta, Miami, Tampa, Dallas, Nashville, Phoenix, Denver, Los Angeles, San Diego, San Francisco, and Seattle.
Steve Moffat: Within the markets Tyler mentioned, we target submarkets with lower-than-average supply, strong population growth or population density, and good rates. Our investment opportunities are chosen based on solid underlying real estate fundamentals, including high barriers to entry, heavy traffic counts, and ease of access. We welcome the opportunity to speak with current owners of operating facilities or developers that have projects under construction or entitled land sites.